U.S. aerospace giant Boeing has scored a major victory against Canadian rival Bombardier after Washington’s decision Tuesday to impose punitive duties of up to 220 per cent on the latter’s jets, but the dogfight is just beginning.
The Commerce Department decided on Tuesday to impose countervailing duties on Bombardier’s CSeries jets sold in the U.S., agreeing with Boeing’s position that the Canadian government unfairly subsidizes the company to build them. That could put major deals like the one with Delta last year to buy up to 125 of the jets in doubt, and bring more repercussions on all sides.
The list price of the Bombardier-Delta deal was $6 billion, although the airline likely paid much less for buying jets in such great volume.
Bombardier has numerous avenues to appeal, including the U.S. Court of International Trade, NAFTA and even the WTO.
Tuesday’s decision is also just one fight between the two companies. Other related rulings are expected, included one anti-dumping complaint from Boeing that’s due to be ruled on next week, and other decisions expected in the spring to determine how much Boeing’s business has actually been harmed by the alleged subsidies.
But if the initial ruling is upheld, the duties that make the jets more than three times as expensive will be due as soon as Bombardier starts delivering the jets to Delta, which isn’t expected to happen until next spring.
Most analysts expected Boeing to prevail, but not for the duty imposed to be so harsh: Boeing itself had only lobbied the government to impose a duty of 80 per cent on the Bombardier jets, not the 220 per cent that was handed out.
Quebec Premier Phillippe Couillard said he is urging Ottawa to take a very “hard line” with Boeing over the Super Hornet deal — and any others. “Not a boat, not a part, not a plane from Boeing [should be] entering Canada until this conflict is resolved in a satisfactory way,” he said.
Construction of the CSeries also impacts the U.S. economy too, as Bombardier says more than half of the jet’s components are made by American-based companies, and the jet’s manufacturing supports more than 22,000 jobs across 17 U.S. states. “We will always defend Canadian companies and Canadian workers against unfair and costly protectionism,” Trade Minister Chrystia Freeland said.
The high profile dispute is also happening against the backdrop of ongoing NAFTA renegotiations, as officials from Mexico, Canada and the U.S. are currently trying to hammer out a new free trade agreement in discussions that have reportedly been very hostile at times.
The repercussions could extend across the Atlantic, too, as Bombardier has a major presence in the United Kingdom where parts of the CSeries are assembled. With 4,200 workers at a Belfast facility making CSeries parts, Bombardier is one of the largest manufacturers left in Belfast, a former industrial powerhouse.
Boeing’s move to hurt Bombardier is a political headache for Britain’s governing conservatives, who are propped up in part by a coalition including the Northern Irish Democratic Unionist Party.
“This is not the behaviour we expect from Boeing and it could indeed jeopardise our future relationship with them,” British Defence Secretary Michael Fallon told reporters in Belfast. “Boeing has significant defence contracts with us and still expects to win further contracts. Boeing wants and we want a long-term partnership but that has to be two-way.”
The battle is far from over, but Boeing wasted no time in declaring an early victory on Tuesday.
“Subsidies enabled Bombardier to dump its product into the U.S. market, harming aerospace workers in the United States and throughout Boeing’s global supply chain.”
Boeing’s goal isn’t to stifle competition, but rather the dispute is about “maintaining a level playing field and ensuring that aerospace companies abide by trade agreements,” Boeing said.
Couillard, meanwhile, insisted at a press conference Wednesday morning that the decision will not stand. “Boeing may have won a battle but let me tell you the war is far from over — and we shall win,” Couillard said.